Kinross Gold Corporation (KGC) Q3 2012 Earnings Report, Transcript and Summary

Hello this is the Chorus Call conference operator. Welcome to Kinross Gold Corporation's Conference Call and Webcast to discuss Q3 2012 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Tom Elliott, Vice President, Investor Relations. Please go ahead, Mr. Elliott.

Thank you, and good morning. Welcome to Kinross Gold Corporation's conference call to discuss 2012 third quarter earnings. With us today, we have Paul Rollinson, Chief Executive Officer; Paul Barry, Chief Financial Officer; Brant Hinze, President and Chief Operating Officer; and Glen Masterman, Senior Vice President, Exploration. Following the presentation, there will be a question-and-answer session. Individuals are asked to restrict themselves to one question and one follow-up question. Before we begin, I'd like to bring your attention to the fact that we will be making forward-looking statements during this presentation. For a complete discussion of the risks, uncertainties and assumptions which may lead to actual financial results and performance being different from estimates contained in our forward-looking information, please refer to Page 2 of this presentation, the news release dated November 7, 2012, and Management's Discussion and Analysis for the same period as well as the annual 2011 Management's Discussion and Analysis of our most recently filed AIF, all of which are available on our website. I'll now turn the call over to Paul Rollinson, CEO of Kinross Gold Corporation.

Thanks, Tom, and thanks to all of you for joining us on the call. Let me start with a brief overview of our performance for the quarter and an update on some key initiatives that we've launched. After that, Brant Hinze will provide additional color on our operations and projects, and Paul Barry will give details on our financial results. As we announced earlier, Paul is leaving the company to pursue other interests. Paul will continue in a transition role for an appropriate period as we welcome our new CFO. But I'd like to take this opportunity to thank him for his dedicated service and many contributions to Kinross. Last week, we announced that Tony Giardini will become our new CFO effective December 1. Tony is a seasoned and accomplished finance leader in the mining industry, and we look forward to welcoming him to our team. Now here are some of the highlights from the third quarter. We produced approximately 672,000 ounces at an average cost of sales of $677 per gold equivalent ounce. As planned, production increased in the second half of the year, and we remain on track to meet our guidance on both production and cost. For the full year, we expect to be at the high end of our guidance range on production and at the high end of our guidance range on cost. Our revenue was $1.1 billion, an increase of 7% year-over-year. Adjusted operating cash flow was $434 million or $0.38 per share, and adjusted net earnings were $250 million or $0.22 per share. All told, we had a solid quarter. We are now squarely focused on how we can do better. Today I'll update you on our work over the past few months to apply a systematic approach to better manage cost and…

Thanks, Paul. I'll be providing a review of our operations and an update on our priority growth projects in a moment. As Paul mentioned, during my regular quarterly meetings in the regions, we rolled out the Kinross Way Forward to our regional vice presidents and site leaders. Those regional teams will be driving the process and as we advance our efforts, it is still very early days in the process but I can tell you about a few wins so far. In the area of capital efficiency, we have identified approximately $200 million in CapEx reductions and eliminations and deferrals. As a result, we have reduced our CapEx forecast for 2012 from $2.2 billion to $2 billion. In supply chain management, we've made several gains. We've moved to a global strategy for cyanide procurement with a long-term contract with our preferred supplier starting in January 2013. The benefits will come from securing a supply at contracted rates, which will mitigate production losses or spot price purchases. We are also moving to a global strategy for explosives and have just launched the global tender for 3 of our sites with the goal of selecting suppliers by the first quarter of next year. With respect to tires, in order to mitigate cost increases due to shortages of Tier 1 tires, we have done 2 things. First, we have just secured sufficient supplies of Tier 1 tires to meet our 2013 requirements. Second, our continuous improvement program for tires has led to achieving as much as 12,000 hours on our large-class, haul-truck tires at some sites, which is far beyond industry average. Again it is still early days and these are just a few initial examples, but they help to illustrate the directional changes we'll be making as we advance the Kinross Way…

Thank you, Brant. Third quarter revenue was $1.1 billion driven by consolidated sales of 672,000 gold equivalent ounces. Third quarter attributable production cost of sales from continuing operations was $677 per gold equivalent ounce, up 8% from the same period last year primarily due to higher costs for energy, labor and consumables. When compared to the second quarter of this year, Q3 attributable production cost of sales reduced by $48 per ounce sold, a 7% improvement. Kinross margin per gold equivalent ounce sold was $972 in the third quarter, a decrease of 5% compared with Q3 2011, due primarily to higher production cost of sales per ounce for the quarter. Quarter-over-quarter attributable margin per ounce increased by $129 per ounce sold or 15% from Q2 2012. Third quarter adjusted operating cash flow from continuing operations was $434 million or $0.38 per share compared to $413 million or $0.36 per share in the third quarter of 2011. Q3 net earnings from continuing operations were $225 million or $0.20 per share compared with $207 million or $0.18 per share for the same period last year. Third quarter adjusted net earnings from continuing operations were $250 million or $0.22 per share compared to $269 million or $0.24 per share in the third quarter 2011. In the third quarter, Kinross further strengthened its liquidity position. On August 17, we closed a new 3-year, $1 billion term loan with an interest rate of LIBOR plus 170 basis points. This represents cost-effective financing for the company and effectively pre-funds the repayment of our senior convertible notes, which may be required in March 2013, should holders exercise their right to have Kinross repurchase the notes. We've also announced that we amended our unsecured revolving credit facility to increase available credit to $1.5 billion from $1.2 billion and…

Thank you, Paul. Operator, can we now please open up the line for questions?

[Operator Instructions] The first question is from George Topping of Stifel, Nicolaus. George J. Topping - Stifel, Nicolaus & Co., Inc., Research Division: Paul, can you tell us whether the severance payment is full and final settlement?

Yes. Thank you, George. We have had a number of questions, and we did feel it was important that we note the accrual for the quarter. And I really don't have much more to say on the matter. I was not involved in the process to determine the severance package. The Board of Directors undertook a process and consultation with independent advisers and, in accordance with the legal obligations, they reached an agreement with Mr. Burt. So I guess that the short answer would be, yes, it is. But that is -- I really don't have much more to say on the matter. George J. Topping - Stifel, Nicolaus & Co., Inc., Research Division: Okay. I really just wanted to confirm there wasn't additional payments. That this matter is settled, you can put it behind you?

Yes, that's correct. George J. Topping - Stifel, Nicolaus & Co., Inc., Research Division: That is correct. Great. Just secondly then, on Fort Knox grades. Great performance from Fort Knox this quarter. Grades 0.76 grams a tonne versus the reserves at 0.43 grams a tonne. Could you tell me what production levels you're expecting for Q4? Or alternatively, how you expect grades to turn out over the next 12 months on Fort Knox?

Yes. This is Brant, I certainly can and thanks for the question. And I would like to recognize the team at Fort Knox. They have stellar performance and their continuous improvement programs have certainly paid off over the years and their performance reflects that. We did -- we certainly did have a good quarter. As we mentioned earlier, in earlier calls and as we've been mentioning all year, we were loaded in the second half of the year. And part of that was the expectation of more production out of Fort Knox, which we are seeing. What we are -- last year at this time, when we look at the third quarter of last year, if you remember, we were in a heavy strip year, and we were pulling from stockpiles to feed the mill. So the grade into the mill was significantly lower than it is this year with the expectation and planned encountering of ore from the mine itself. So the performance both from the mill, mill throughput, mill grades as well as the heap leach performance, we would expect to see to continue through the fourth quarter. George J. Topping - Stifel, Nicolaus & Co., Inc., Research Division: Great. So similar levels, would you say, for the fourth quarter, if I understand that correctly?

Yes. We could expect to see similar performance. George J. Topping - Stifel, Nicolaus & Co., Inc., Research Division: And just finally and then I'll hand it over. On Tasiast, the costs were -- cash costs were $300 an ounce, less than the previous quarter. This seems mainly related to the amount of dump tonnage that was placed during the quarter. Could you give us an indication of what the contribution from the dump was in Q3 and what you're expecting for Q4?

Yes. This is Brant again, and I certainly can address that. There's a couple of things that contributed to lower costs this quarter. One is that we saw less operating cost stripping and more capital stripping this quarter than what we saw in previous quarters. And as well, we encountered a significant amount of lower grade dump leach-style material in the Piment pits, which we had to stockpile in order to maintain a feed for the mill. Going forward, I would expect cost to reflect what we saw -- what we have been seeing for the year. And I would consider this quarter to be a little bit anomalous.

The next question is from Patrick Chidley of HSBC.

Just wanted to find out if Paracatu in Brazil, you are or will be receiving any benefit from the reduced power cost that the Brazilian government's been discussing for industrial customers there?

Yes. This is Brant. We sure hope so. It hasn't been codified yet that we're aware of. But we would hope that we would be part of the cost reduction opportunity from the government program to reduce overall power cost for the country and including industrial users.

And could you just maybe give an idea of what the proposals are? It's probably not that well telegraph this. But maybe you can give us an idea of how that might affect you?

Well certainly with the Paracatu mill, in particular Plant 2, it's a very large plant. So it is a -- a major cost there is power. And the government has been talking about a percent reduction in industrial rates. But until we see what the finalized number is, we won't be able to predict what our cost opportunities will be as a result of that.

When you say a percent, you mean like 20% or something, right?

Yes, I mean, and again, the government has proposed some rate reductions. And until we see the final...

We don't speculate.

Yes, it's pretty hard to speculate.

The next question is from Alec Kodatsky of CIBC.

Just had a couple of questions. Firstly, with respect to the cost control initiatives, are you still -- are offering sort of a directional perspective on how things will be impacted? Are you yet in a position to understand the magnitude of what these efforts might actually translate into in terms of cash cost? And if not, sort of when would you expect to be?

Alec, Paul here. Look, I think this initiative that we've rolled out, that we're calling the Kinross Way Forward, at its core we go and we look at each mine on a first-principles basis. It isn't an initiative that say we can come out with a one-size-fits-all sort of process. As you'll appreciate, different mines have different grade distributions and there are different alternatives at each mine. So we don't think it makes sense to try to set a hard-line target that might apply to each operation. It really is a case-by-case basis. It is a behavioral change and way of thinking as we goal seek margin versus maximizing production. We just rolled this out post Labor Day. We do have a team, a team leader, and we are starting to get some early wins. What we will do is, each quarter we'll try to give an update on what those wins would be and where we're finding value and opportunity as a result of the initiative. Brant, I don't know if there's anything you want to add there.

Yes, and I think it's important to recognize that there are going to be opportunities, near-term opportunities to build into a budget for 2013. There's going to be mid-term opportunities and there's going to be long-term opportunities looking across the spectrum of the 7 levers that we're going to be focused on in the Way Forward program. But I would say as well, it's as much a behavior change in all of our employees for that inward focus on margin and free cash flow for the short term, midterm and long term across these 7 levers. And as Paul said, that's what our focus is going to be.

Okay. So we should sort of view this as a sort of a process of evolution and then it will be borne out in the results as they go forward?

Yes.

And then just shifting to Paracatu. Wondering if you could provide any color on the nature of the recovery issues? Is it related to grind size? Is it something in the ore?

Yes. Sure. I'd be happy to respond to that. Paracatu, as you know, we've spent an awful lot of time and effort building Plant 2 out to what it is today, and we now have the fourth ball mill in the commissioning phase. So the primary construction is behind us. What we have been seeing is the grade at Paracatu over the last few years has been approaching the average grade of the mine. So the grade is right around that 0.4, 0.39 grams per ton, and that's about where we are now. That being said, a lot of effort that has been put into the flash floats, which are now fully operational, and the desulph program have been focused on addressing lowering the grade in the tailings and that's where we are right now. The other component of this, though, that I think is really important is that we put a very strong team in place at Paracatu. And one of their main efforts has been to improve the operation of the plant itself and the consistency of the operation of the plant, meaning that we're looking at improving the unscheduled interruptions, and we're looking at improving mechanical availability. We're looking at improving throughput, and we had to spend the time to get that plant operating where we needed it. Now there are still improvements to make there, but we've got that plant running pretty good now. And with that, and now with the fully operational flash floats and the fully operational desulphurization program and process, we would expect to see our recoveries improve going forward now in the fourth quarter.

The next question is from Anita Soni of Crédit Suisse. Anita Soni - Crédit Suisse AG, Research Division: I just wanted to get an understanding about, I guess, further to George's question with regards to the grade at Fort Knox. You addressed Q4, but how do the next couple of quarters look after that? And how long could we expect that sort of high-grade phase to continue?

Well, I can speak to next quarter. And as far as 2013, we're still in the budgeting process, so we'll come out with that guidance after the process and after the first of the year. But certainly, for the fourth quarter we -- of this year, we fully expect to see more of the same. And as I indicated, the region in total is performing quite well, and the region and the total portfolio, we are on guidance both on production and on cost for the year. Anita Soni - Crédit Suisse AG, Research Division: So my next question is with regards to the $200 million in cost reduction. Can you just give a few examples of the types of, I guess, deferrals both on sustaining and the development side that contributed to the $200 million reduction?

Sure. A lot of it did relate to activity at Tasiast, but maybe you can...

Yes, I can elaborate on that. Some of the reductions, if we look at some of the things that we did earlier in the year with resetting our projects and resequencing our projects, obviously there were cost reductions associated with that resequencing. In addition to that, by stepping back and taking a look at Tasiast, there were equipment schedules, primary crushers and some infrastructure upgrades that we have either canceled or deferred to a later date. And that stands true as well, too, to some of the other -- some of our operations where there was a relook at equipment schedules and strip schedules and some mine planning opportunities that we advanced. Anita Soni - Crédit Suisse AG, Research Division: And then last question. With regards to the 0.5 to 0.8 gram per tonne material, it could be higher now, I'm not sure, but what would have been classified sort of the heap leach material. Is there a possibility to dump leach that? Or I mean, would it be economic to bring that material up to the CIL level and crush it and see if you can get -- sorry, process it and put it through the mill to see if you can get higher recovery rates out of that? I mean, what's the plan for that? Because I believe there was a significant amount of material in that category.

Yes, that's a good question, Anita. I mean, the bottom line is more work to follow. We will continue to study what our options are. We will have to mine through that material. We will look at other alternatives. Some of it may, in fact, go through the mill, and there may be some other heap alternatives. But yes, we don't -- we haven't finished that work. The work's ongoing, but the material will be removed and stockpiled, and we will contemplate what alternatives we may have for that going forward. Anita Soni - Crédit Suisse AG, Research Division: And that's -- that work, I guess, will be done in conjunction with the fease that's going to be out in Q1 2013?

Well, it's -- I mean, it'll just continue on parallel. As I say, the pre-fease that we're currently working on is strictly related to the CIL. But in parallel, we'll continue to think about what our alternatives are for some of that lower grade sulphide material that might not be amenable to the mill; coarse crush, for an example.

And Anita, I think it's important to look at that. If there is a coarse crush option to that, that looks practical to us at this point, it would be something that we would consider carrying through to feasibility. If not, as Paul mentioned, we would stockpile that material for future opportunities. And it's not uncommon to see low-grade stockpiles in the industry that have -- end up making us money as gold price changes and opportunities present themselves. And I think what we're experiencing at Fort Knox is a perfect example of that where we have about 130 million, 140 million tonnes of low-grade material that we stockpiled over the years that is now making us a good profit.

The next question is from Brian MacArthur of UBS Securities.

Sir, I just wanted to follow up on Anita's question. Of that $200 million you talked about deferrals, and now you sort of said a lot of it is Tasiast. How much of this -- and you talked about some of it being eliminations. How much of it is actually true eliminations as opposed to just deferrals, i.e., what I would call peer savings out of the system? Is it 1/3 like you talk about or...

Well, I don't have a direct answer here for that as far as was 1/3 of it complete deferrals, was 1/3 of it complete eliminations at this point. Because for example, and I'll give you an example why I can't answer that directly. Because if you look at a project like Lobo-Marte, we did have trucks and equipment on order for Lobo-Marte as we were moving forward rapidly with that. We have put those, all that equipment, at this point on hold, and we put it on hold because we're looking at Lobo-Marte and we're looking at our options on what Lobo-Marte will look like in the future. So if it is a 47,000 tonne-a-day operation then that equipment will be needed. If it's a 20,000 tonne-a-day operation, not all of the equipment will be needed. So I can't say that it's a complete deferral or a complete elimination, and that's why I can't give you a direct answer on that.

Okay. But it wouldn't have just been like, say, the original Tasiast, you're going to spend a lot this year and 150 to 200 of it was Tasiast and you just took it out and that's what the majority of it is. It's across a wide number of things for the system?

Absolutely. Tasiast is one area where we've gotten reductions, and which would be reductions, eliminations and deferrals, and certainly other areas in our operations and projects as well.

And I guess I'd add to that. Said another way, a lot of the elimination would be perhaps relating to potential scope change as we go from maybe a larger throughput to a smaller throughput-type scenario.

The next question is from David Haughton of BMO.

If I could just go to Kupol. Getting very good throughput there, about 20% above design capacity. Should we think about that as achievable going forward?

Yes. I'll answer that. As you know, the Kupol mill, we're upgrading and making some modifications to the Kupol mill to receive the Dvoinoye ores. And the Dvoinoye ores will be in the range of about roughly 900 to 1,000 tonnes a day. So if we look at the performance of the existing mill and recognize that we're going to also be putting Dvoinoye ore through that mill, one would expect that we would see mill production and throughput to increase further to accommodate the Dvoinoye ore. So I would say that from Kupol itself, that 3,500 tonne-a-day range is sustainable. And then in addition to that, we would have the throughput capacity increment for Dvoinoye.

Right. So for Dvoinoye, I think previous guidance had been stepping up 50% from that 9 plates [indiscernible], so going to 4,500 tonnes a day once Dvoinoye is online. Is that still okay?

Correct.

All right. Now going back to Tasiast. With the heap leach decision, was that simply taken in isolation? Or did you also consider as part of that evaluation the impact of potentially elevating grade presented to the future mills and the impact on strip? Was that -- were those additional ideas included in your evaluation of the heap leach? Or was it simply taken on a stand-alone kind of basis with no other flow and implications for the potential 30,000 to 60,000 tonne-per-day mill?

I think really, isolation seems like a strong word. But the point here was it was really all about trying to understand that sulphide recovery on the low-grade material. As you know, that's a fairly lengthy process. We had quite an extensive sample set, and it took some time to get through all of that column testing. I think had we had a different result, I would answer it a little differently, not so much process and isolation. But had we had a better result, I think we would've obviously then modified our thinking as we completed the pre-feasibility study.

Yes, it seems from the face of it, Paul, that the 60% recovery had been something that had been discussed previously. So was the harder part of it taking it to minus 8 mills? Was it the energy that you need to invest in this thing that really tipped the balance for you?

When we look at the required crushing on this, down to a fine -- a real fine crush or a fine grind, one could almost call it, what seems to be the magic component of even achieving the 60% recovery that we've seen is the micro fracturing of HPGR to allow for more efficient leaching. So that micro fracturing was extremely important even to achieve the recoveries that we have. The test work that we did, because the previous test work was not what we would consider representative of the entire resource, and that's why we went into a full test program on the entire Greenschist to see if, through our test work, if we could, number one, reconfirm some of the earlier test work even though incomplete and make a determination if the material, not just the low-grade material but all of the Greenschist material, might be amenable to a HPGR fine crush heap leach option with a recovery that would have us consider something other than or supplemental to CIL.

The next question comes from Greg Barnes of TD Securities.

Paul or Brant, ignoring the Tasiast expansion for a second, what do you think or how does Tasiast production look like going forward from here over the next 3 or 4 years?

Well, I mean, I'll start and hand off to Brant. I mean, as you can appreciate, Greg, there's a -- it's a complex situation. We have a lot of things going on over there in addition to the operation with development, exploration and infrastructure build out. So we do have challenges. We've talked about the grade reconciliation situation, which we're working through. I do believe we're going to have some challenges in the coming year. But Brant, maybe you can elaborate.

Yes, and I'm sure you can appreciate the fact that we have a producing mine there in the range of 200,000, 225,000 ounces a year, and we're superimposing over the top of it this much larger, much larger project. So in all intents and purposes, it's truly a brownfields type project. But a super brownfield, if you would. And that imposes a lot of complexity and difficulty for the operation itself. And in addition to that, with the reconciliation challenges that we're having currently, and we're not going to have a clearer picture of this until we complete the geology model by the end of this year and the grade -- a new grade model in the first quarter of next year to try and get a better understanding of that and a better planning tool. With all of that, I would suggest that the Tasiast project, the current project is going to be challenged and will always -- until we have the greater Tasiast, it will probably be a higher cost producer for us.

Just a follow-on from that then. I think the CapEx spend at Tasiast this year was now, I believe, something in the range of $600 million, $650 million after you've cut some costs out of it. Where do you see that number next year? And I appreciate you're in budgeting right now. But if spending money on infrastructure, just kind of get some kind of idea what that is going to look like going forward?

Yes, I mean, you hit the nail on the head, Greg. We are going through that right now. And to Brant's point, there are infrastructure requirements there. We're upgrading roads. I think the quality of the existing mill, the waterline, we've put more rock through that mill than has ever been put through before. That's how you find leaks in the waterline. So we do -- we will have infrastructure spending to carry out just to keep the existing operation in good stead. But we haven't finished the exercise of thinking what that spend will be. We're going through all of that process right now through our annual budget cycle, and we'll come out with that in the new year.

The next question is from Sean Heberling of Marion Street Capital.

Can you provide some color on the $750 million in short-term investments that was on your balance sheet?

Sean, Paul Barry maybe can tackle that.

Yes, I'm not sure exactly what you mean. I mean, they're of high quality, very secure, albeit low interest-bearing instruments, but of the highest quality.

Okay. Yielding more than the debt on your credit facilities?

They do not. We pay a premium over LIBOR, and so they're in a bunch of government securities, which are obviously lower yielding.

What's the purpose for marking the drawdown in those securities then?

Well, it's higher than cash balances right now, but the intent is to keep the money secure and safe and available for future expansion.

Any exposure to European sovereigns in that?

No.

The next question is from Pawel Rajszel of Veritas Investment Resources.

Just a couple here. Paul, if you could talk about your willingness to sell some of your underperforming or high-cost assets in order to reach lower costs? And if so, which assets would those be?

Yes, look, I would say a couple of things. Number one, I don't feel we need to sell anything. We've got a very strong balance sheet and lots of liquidity, sufficient balance sheet strength and liquidity to carry out whatever we need to do going forward as it relates to the growth projects. And I would also say -- so M&A is not at the top of the list for our thinking, but we are undertaking this process under the Way Forward. We are focused on margin. Step 1 is to look at each of these assets and think about how we're mining them and how we're operating them and how we get more margin. I don't want to speculate but obviously, I guess you could say that coming out of that exercise, if a particular asset didn't meet our requirement then, yes, it would be up for a discussion. But I would also say, if ever we sell assets, and we do sell assets from time to time, we tend to want to sell them accretively. And so we would also have to have a, I guess, an expectation that we'd be able to get a better price than strictly a harvest scenario owning it ourselves.

And just to follow up regarding the Kinross Way, you mentioned margins and free cash flows but didn't really seem like you mentioned returns. Can you touch on how you find the balance there? What your thinking is in terms of incorporating returns and as well as balancing the free cash flows and margins?

Yes. Sure. Look, the return question, which I get from time to time, is a good one. Obviously, we don't have a bright line sort of number that it must meet this return or we will not proceed. Again, to me you have to look at it on a case-by-case basis, and you have to be somewhat strategic. We have assets, for example just to illustrate the point, that are very high margin, high cash flow, but relatively finite lives, perhaps with limited exploration upside. We have other assets where they're higher cost, lower grade, less cash flow contribution, but we do have some very compelling exploration potential. And so when I think about returns and goal seeking margin, I have to look -- I think we have to look a little bit strategically. In the case of the higher cost, lower grade, lower margin scenario, when we think about return, we want to keep in mind that preserving optionality as it relates to exploration is also a figure. So it's -- I guess the short answer is, we are looking at it from a number of different lenses.

The next question is from Tanya Jakusconek of Scotiabank.

I just have 2 questions. One for Paul Barry. Can you just let me know what exactly was the inventory adjustment through the Tasiast cash cost this quarter?

You're asking for the precise amount?

Yes, so that I can take it out to look for a more normalized number.

Okay. One moment please.

And then maybe just another one for Paul. I mean, I appreciate and I heard your thoughts on just looking at returns. But when you looked at the sulphide heap leach options at Tasiast, you obviously had a certain hurdle rate you were looking to get back. Would it be fair to say that this did not meet your cost of capital?

That's a good question, Tanya. I mean, it's -- yes, I guess the short answer would be yes at this point, that would be a correct way to look at it. I mean, I tend to think about it a little bit differently. I think when you think about the fine crush energy required on a base case assumption of diesel gen sets with that low-grade material, it just simply wasn't compelling enough economics at this point. But essentially -- but as we said earlier, we will be extracting that material, we'll be stockpiling that material, and we'll continue to look at options. But I would also stress, in the back of our minds when we're thinking about this, we are messaging here that it's not about just producing ounces for the sake of producing. It's -- we are margin focused. So we will stockpile that material, but our behavioral shift towards margin will be the overriding determinant as to whether or not we feel we can proceed.

Let me answer your question about the inventory just on Tasiast. The amount was approximately $20 million.

Okay. So if I divide that by the number of ounces produced, I would get that on a per ounce basis?

That sounds right.

Give or take. And we could maybe follow up with you offline, Tanya.

Well can I just clarify the prior question about the short-term investments? I mentioned government securities. Just to be clear about this, these are the highest-quality government securities, that is U.S. and Government of Canada short-dated paper.

Thanks, Paul.

The next question is from Anant Inani of JPMorgan. John D. Bridges - JP Morgan Chase & Co, Research Division: John Bridges, JPMorgan. I just wondered, Sahara is known for being quite hot, and I just wondered if you'd thought about the bio angle on the lower grade material? If you're going to crush it down to a small size, then would that work if you could perhaps get hold of some freshwater?

That's a good question. I mean, I think I'll let Brant tackle this one. But look, again, I would say we're going to remove the material, we're going to stockpile the material and we're going to look at every possible opportunity. On the bio-ox in particular, that's a good question. I -- Brant...

I think it's a good question. I mean initially, as Paul mentioned, we looked at a fine crush as an option for this material because, as stated earlier, with HPGRs we get the micro fracturing which does enhance the leach success and the recovery rate on that material. Bio-oxidation at this point right now, it isn't anything that we've taken a real serious look at. But I think, as Paul mentioned, that if -- we'll be looking at different options for this material going forward. Again, whether there's a coarse crush option that we want to carry to feasibility study or just stockpile the material for future opportunities, we'll be looking at, I would say, all options and all opportunities for that material going forward. John D. Bridges - JP Morgan Chase & Co, Research Division: Okay. I'm intrigued that you've signed up cyanide on long term. The cyanide price is coming off quite on a high level. How does the price you've contracted for compare to the long-term trend rate for cyanide prices?

Well, I'm certainly not at liberty -- it's a contract, so I'm not at liberty to give contract prices. But I would suggest that it's favorable. John D. Bridges - JP Morgan Chase & Co, Research Division: Okay. You've been having water leaks in the system though. Do you have a percentage as to how much water you're actually losing along the way?

Yes, it's not so much losing the water. It's not being able to pump and raise the pressure to a certain level to get the maximum volume. When you do spring a leak or have a separation in a pipe, you go in and you repair it. So it's managing that pressure and getting the repairs done so that we can continue to increment up the pressure and get the volume to where we want and need it.

There are no more questions at this time. I'll turn the conference over to Mr. Rollinson.

Thank you, operator. I thank everyone for joining, and we look forward to speaking with you again in the new year. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may disconnect your lines. Thank you for participating. Have a pleasant day.